Bad news for Modi as India’s unemployment at worst in 29 months

The CMIE’s figures are regarded by many economists as more credible than the jobless data produced by the government. The figures will be annoying news for Prime Minister Narendra Modi ahead of a general election due to be held by early May this year.

Prime Minister Narendra Modi, who came to power in 2014 on the promise to create 10 million jobs annually, has been accused of creating the worst unemployment crisis in decades. The recent report on unemployment is very shocking and highest.

The unemployment rate in India rose to 7.2% in February 2019, worst in 28 months, and up from 5.9% in February 2018, shows a new data compiled by the Centre for Monitoring Indian Economy (CMIE), released on Tuesday. Meanwhile, the labour force is down by 25.7 million since September 2016 and the number of employed persons has declined by 18.3 million in the same period.

The unemployment rate has climbed up despite a fall in the number of job seekers. Citing an estimated fall in the labour force participation rate, Mahesh Vyas, head of the Mumbai-based think tank told to Reuters that the number of employed persons in India was estimated at 400 million in February.

The CMIE’s figures are regarded by many economists as more credible than the jobless data produced by the government. The figures will be annoying news for Prime Minister Narendra Modi ahead of a general election due to be held by early May this year.

The unemployment rate has shot up from 5.9% in February 2018, higher than January (7.1%). The labour participation rate – the proportion of the working age population, comprising those over 15 years of age, that is either employed or unemployed but actively looking for a job – has ironically been falling.

According to Mahesh Vyas “the falling labour participation rate implies that lower proportion of the working age population is willing to work”. The total number of employed persons in February 2019 is estimated at 400 million against 406 million in the year-ago period and 407.5 million employed in February 2017.

However, there is a significant decline even on a monthly basis. The labour participation rate fell from 43.2% in January 2019 to 42.7% in February. “In every month of 2018 and in the months of 2019 so far, the ratio has always been lower than it was in the corresponding month of the previous year. This was also the case in 2017. But, that could be attributed to demonetisation. The continued y-o-y fall in the labour participation rate even in 2018 and 2019 indicates a deeper or a more sustained problem ailing India’s labour markets,” said Vyas.

The Narendra Modi government on employment was stuck in a controversy when a leaked report about India’s joblessness revealed that unemployment rate rose to its highest level in at least 45 years in 2017-18. For the first time, half of India’s working-age population (15 years and above), is not contributing to any economic activity, data analysis by the National Sample Survey Office (NSSO) shows.

Earlier, the government withheld the release of the survey, prompting two members of the National Statistical Commission (NSC) to resign. After the survey’s findings were reported by the Business Standard in January 2019, officials at Niti Aayog, the premier government policy think-tank, first claimed it was not final, and then sought to discredit it.

A CMIE report released in January claimed nearly 11 million people lost their jobs in 2018 after the demonetisation in late 2016 and the launch of a new GST in 2017, hit millions of small businesses. Last month, the government told to the Parliament that it did not have data on the impact of demonetisation on jobs in small businesses.

The CMIE data released yesterday shows that for the last one year, India has witnessed ‘the dreadful phenomenon’ of falling labour participation rates and rising unemployment rates. This nerve-wracking combination has led to a falling employment rate. The key statistic has been decreasing since November 2017 when it stood at 41.8%. By December 2018, it fell to 39.5% and further to 39.7% last month.

Given that the working age population grows by an estimated 23 million a year, even if we assume that only 42-43% will join the labour force, Vyas calculates that we need to find 8 lakh new jobs on a net basis every month.

However, the falling employment rate is bigger problem for India than the unemployment rate. All these are bad news for the Modi government ahead of the looming general elections. Finally, India’s fast-paced economic growth has failed to generate employment opportunities for over 12 million Indians who enter the job market every year. The Congress-led UPA government was responsible for “ten years of jobless growth”, NDA reverse the trend.

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Bad news for Modi as India's unemployment at worst in 29 months

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The CMIE’s figures are regarded by many economists as more credible than the jobless data produced by the government. The figures will be annoying news for Prime Minister Narendra Modi ahead of a general election due to be held by early May this year.

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